HCAJ 72/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 72 OF 2009

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BETWEEN

SYNEHON (XIAMEN) TRADING CO. LTD.   Plaintiff

                                                     and

AMERICAN LOGISTICS LIMITED              Defendant

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Before: Hon Reyes J in Chambers

Date of Hearing: 8 July 2009

Date of Judgment: 8 July 2009

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J U D G M E N T

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I.   INTRODUCTION

1.                                        By a Bill of Lading dated 23 October 2008 American Logistics (AL) acknowledged receipt from Synehon of 12 containers of 10,200 cartons of canned peach halves for carriage by sea from Qingdao (PRC) to Manzanillo (Mexico). The Bill of Lading named Stern as consignee and Assesoria (a customs broker) as notify party.

2.                                        On about 22 November 2008 AL’s Mexican agents (Transglory) caused the cargo of peach halves to be delivered to Stern in Manzanillo without production of an original Bill of Lading. Stern never paid Synehon for the goods.

3.                                        By Writ dated 17 April 2009 Synehon sought damages of US$186,055 from AL for misdelivery of the goods to Stern without production of an original bill of lading.

4.                                        Synehon now seeks summary judgment against AL.

II. DISCUSSION

A. Liability

5.                                        This case concerns a straight bill of lading, Stern having been named as consignee on the face of the bill.

6.                                        Recently, in Carewins Development (China) Ltd. v. Bright Fortune Shipping Ltd. FACV No.13 of 2008, 12 May 2009, the Court of Final Appeal affirmed that in such situation, absent an effective exemption clause, a carrier is liable for breach of contract or in conversion if it releases goods without production of an original bill of lading.

7.                                        Accordingly, no exemption clause being relied on here, AL must be liable to Synehon for breach of the contract evidenced by the Bill of Lading and for conversion of the relevant cargo.

8.                                        How does AL seek to excuse its conduct?

9.                                        First, AL suggests that the cargo was released to Stern “with the express and/or implied consent of [Synehon]”. That consent is said to be evidenced by e-mail exchanges between Mr. Yang Dong Sheng of Synehon and “Conamar -- Ramon Gomez FC” dated 26 November and 8 December 2008. Conamar appears to have been Synehon’s Mexican agent in dealings with Stern.

10.                                   The 26 November e-mail reads:-

“Dear Ramon,

Finally I am able to calm down since the shipping line has released the cargo to Stern. Now we have to review our biz with stern, or let’s say how to repair the relation which certainly has been damaged....”

11.                                   The 8 December e-mail reads:-

“Dear Ramon,

Pls inform Stern that I understand that they need time to finish those job. That’s why I asked them to pay 20% or 30% of invoice amount this week and the rest we can wait till they have a final solution. They can give us final solution till end of Dec, no problem. After receiving 20% I will be patient. Hope you have a positive answer from them on Wednesday, or I have to do something here.

looking forward to hearing from you.

best regards

yang”

12.                                   I do not see how these e-mails constitute evidence of a viable defence.

13.                                   I shall assume that the e-mails concern the cargoes which are the subject of this action. The mere fact that Synehon was prepared to negotiate terms with Stern for the delayed payment of the misdelivered cargoes would not mean that Synehon has excused AL’s wrongful release of the goods to Stern.

14.                                   The goods having been wrongly delivered to Stern, Synehon might seek to make the most of a bad deal by trying to get payment from Stern if only by instalments. That would be a wholly commercial approach to what has occurred.

15.                                   But one cannot infer from any negotiations with Stern that Synehon has consented to AL’s act of converting the goods in the first instance. The 2 events, AL’s conversion of the goods and Synehon’ subsequent negotiations with Stern about payment, are unrelated matters.

16.                                   If anything, the inference to be drawn from the 26 November letter is how incensed Synehon must have been as a result of the misdelivery of the goods to Stern contrary to normal practice. As a result, Synehon lost any security interest it might have had in the goods and became constrained to negotiate payment from Stern without the leverage to be had from (say) the ability to exercise a lien over the goods.

17.                                   I add that, in actuality, it is pure speculation on AL’s part that some sort of settlement has been reached between Synehon and Stern in relation to payment for the goods converted.  All the e-mails suggest is that Synehon and Stern were talking about settlement. There is nothing to show that anything concrete was ever achieved. On the contrary, Synehon has affirmed that the amount claimed here remains unpaid.

18.                                   Thus, this ground does not constitute an arguable defence.

19.                                   Second, AL refers to clause 6 of the Bill of Lading. That provides that the Bill is subject to:-

“(a)   the provisions contained in any international Convention or National Law which provisions ... cannot be departed from by private contract to the detriment of the Merchant; and

(b)     would have applied by force of law if:-

(i)    the Merchant had made a separate and direct contract with the carrier ... in respect of the particular stage of transport where the loss or damage occurred and ...

(ii)   such contract was governed by the law of the State in which the loss or damage occurred, or in which the port of shipment is situate as the case may be.”

20.                                   According to AL, by reason of clause 6, section 134 of the Navigation and Trade Law of Mexico is applicable to the Bill. The latter law provides for the application of the Hamburg Rules to shipments into Mexico.

21.                                   AL thus relies on Hamburg Rules 1978 Art. 4. That provides:-

“(1)   The responsibility of he carrier for the goods under this Convention covers the period during which the carrier is in charge of the goods at the port of loading, during the carriage and at the port of discharge.

(2)     For the purpose of para. (1) of this Article, the carrier is deemed to be in charge of the goods:-

(a)   from the time he has taken over the goods from:-

(i)    the shipper, or a person acting on his behalf; or,

(ii)   an authority or other third party to whom, pursuant to law or regulations applicable at the port of loading, the goods must be handed over for shipment;

(b)   until the time he has delivered the goods:-

(i)    by handing over the goods to the consignee; or

(ii)   in cases where the consignee does not receive the goods from the carrier, by placing them at the disposal of the consignee in accordance with the contract or with the law or with the usage of the particular trade, applicable at the port of discharge; or

(iii) by handing over the goods to an authority or other third party to whom, pursuant to law or regulations applicable at the port of discharge, the goods must be handed over.

(3)     In paras. 1 and 2 of this Article, reference to the carrier or to the consignee means, in addition to the carrier or the consignee, the servants or agents, respectively of the carrier or the consignee.”

22.                                   It is AL’s case that, by the Hamburg Rules, AL’s responsibility for the goods ceased upon their being handed by AL to Assesoria for customs clearance in Mexico. The goods had to go through customs. So, the argument runs, the handing over of the goods to a customs broker was a handing over to a third party to whom the goods had to be handed over within the terms of Art. 4(2)(b)(iii) of the Hamburg Rules.

23.                                   In support of this, AL exhibits an e-mail from its Mexican lawyers as follows:-

“Please be advised that although Mexican law does not provide literally that all cargo coming to Mexico from a different country must be handed over to a customs broker in Mexico, Mexican law does indeed establish that those importing or exporting goods into or from Mexico are obliged to furnish to the customs house, only through a customs broker or customs agent, an import (or export) declaration. Therefore, due to the fact that it is only possible to import goods into Mexico with a customs broker or customs agent it is to be construed that such goods must be handed over to the customs broker or customs agent and just after the goods have been duly imported, these can be handed over to the consignee.

In view of the above, in our opinion, the carrier fulfilled its delivery obligation in terms of what the Hamburg Rules established (rules which are applicable in Mexico) Rules, once the cargo was handed over to the customs broker, as we understand that happened.

On the other hand, please be advised that our Customs and Foreign Trade Department has mentioned to me that it is possible to track down the final destination of any goods that have been imported into Mexico so if you like we can try to track the specific goods that were lost.

Should you have any further questions or need additional information, please do not hesitate to contact us.”

24.                                   I do not accept AL’s reasoning.

25.                                   I shall assume (without necessarily accepting) that, in some way or other, Mexican law and (in consequence) the Hamburg Rules apply.

26.                                   Where (as here) goods are exported from one state to another, the goods will usually have to clear customs in the importing state. Such clearance is typically compulsory. If the Hamburg Rules had the effect for which AL was contending, that would mean that in every case where goods have to be cleared through customs, the Hamburg Rules should have the effect of overriding and negating a carrier’s obligation to deliver the goods to an identified consignee. That would be an absurd result. On this basis alone, the construction of Art. 4 posited by AL cannot be right.

27.                                   When one clears customs, there are effectively 2 possible modes of proceeding.

28.                                   First, insofar as the carrier is responsible for effecting clearance, the goods are returned to the carrier or the carrier’s order upon effecting clearance. The carrier would then hold the goods until delivery to the consignee in exchange for an original bill of lading. Simply, because goods are “handed over” to customs at a port cannot be the end of the story. On this scenario, the goods are handed back to the custody or control of the carrier once customs have been cleared for delivery by the carrier in accordance with the terms of a bill of lading.

29.                                   A second possibility is that a consignee is responsible for clearing the goods through customs. In such case, typically the goods are deposited in a customs warehouse by the carrier in exchange for a warehouse receipt. The carrier then transfers the receipt to a consignee who claims the goods from the carrier upon production of an original bill of lading. This is sometimes referred to as an “attornment” by the carrier to the consignee. Armed with the receipt, the consignee clears the goods through customs (paying any relevant storage charges) and collects the goods. Again, in this situation, the goods will not be released to the consignee by the customs, except upon an authorisation by the carrier.

30.                                   It seems to me that Art. 4(2)(b)(iii) contemplates the situation where, by law, the carrier is required to hand over the goods to some third party in circumstances whereby the carrier’s obligations to on-deliver the goods to a consignee are plainly extinguished.

31.                                   Such a situation might arise where, for instance, customs seize goods as contraband. The carrier is then bound in such case to hand over the goods to customs and can no longer fulfil the contractual obligation to deliver because (as far as the relevant national law is concerned) title in the confiscated goods has vested in the state. The “handing over” to the third party is the end of the story. This is perfectly consistent with international commercial practice and commonsense in a way that the reading of the Hamburg Rules advocated by AL cannot be.

32.                                   The Bill of Lading evidences a contract by which AL as bailee agreed with Synehon as bailor to deliver the goods to Stern on production of an original Bill of Lading. Plainly, the Hamburg Rules do not extinguish such obligation. On the contrary, in accordance with Art. 4(2)(b)(i), AL’s responsibility for the goods continued until delivery to the consignee in accordance with the terms of the Bill of Lading.

33.                                   I add that I see nothing in the e-mail from AL’s Mexican lawyer that contradicts what I have just set out. As evidence of Mexican law, the e‑mail from the Mexican lawyers seems to me of no probative value. No specific provisions or case precedents of Mexican law are identified. Further, the opinion is far too tentatively expressed.

34.                                   Thus, this ground does not constitute an arguable defence.

35.                                   Third, AL faintly queries Synehon’s title to sue.

36.                                   There is nothing in this ground. Synehon stood in the position of bailor and AL as bailee. Normally, a bailee cannot question its bailor’s title.

37.                                   In the circumstances of this case, as an unpaid seller, Synehon had a security interest over the goods. It could exercise a lien over the goods or demand their return. By causing the goods to be handed to Stern, AL acted in a manner which was contrary to Synehon’s rights and converted the goods. It therefore must be liable to account to Synehon for the value of the goods at the time of their conversion.

38.                                   In summary, AL has no arguable defence as far as liability to Synehon is concerned.

B. Quantum

39.                                   The commercial invoice value of the converted cargoes was US$188,700 FOB Chinese port. To this, Synehon adds the cost of insurance (US$500) and deducts a pre-payment by Stern of US$3,145. That leaves outstanding a balance of US$186,055, which is the sum claimed here.

40.                                   AL suggests that it is not liable for such sum because of alleged evidence that 60% of the goods misdelivered were oxidised. AL says that Stern’s sub-buyer (Chedrani) rejected the goods for this reason.

41.                                   The evidence for the 60% oxidisation is a double hearsay statement from Tansglory’s Ms. Yolanda Escobar. Ms. Escobar is said to have been informed by Mr. Mario Mendoza of Stern that Chedrani rejected the cargo because it was 60% oxidised.

42.                                   Such evidence is again of no probative value. It is in effect little more than an assertion that the converted goods were oxidised.

43.                                   By converting the goods, AL acted as a despoiler. AL has made it impossible for Synehon to get its hands on the goods and show that the same are not oxidised. In such circumstances, the law presumes against the despoiler that the goods were not defective. There must at least be an evidential burden on AL as a despoiling bailee to show that the goods were defective. A bare, unparticualarised hearsay statement is insufficient to overcome the presumption against AL.

44.                                   Synehon accepts that on 19 November 2008 Stern sent an e-mail complaining of the delivery of oxidised goods. But, given that AL’s misdelivery did not take place until about 22 November 2008, Synehon suggests that such complaint by Stern related to previous shipments.

45.                                   Synehon denies that even the previous shipments were oxidised and says that the complaint of oxidisation is merely a ploy by Stern to delay payment. Whether or not that is the case, I note that the 19 November e-mail supports Synehon’s contention that the complaint relates to a previous shipment.

46.                                   But it is unnecessary for me to decide the truth or falsehood of Synehon’s contentions on oxidisation, it is enough for the purpose of obtaining summary judgment on the quantum demanded that AL is unable to displace the burden of adducing a prima facie case imposed upon it as bailee.

47.                                   Consequently, Synehon is entitled to judgment for the full amount claimed.

III. CONCLUSION

48.                                   There will be judgment in Synehon’s favour against AL for US$186,055. Interest will run on that amount from 22 November 2008 (the date of conversion) to today at 1% over US$ prime. Thereafter, interest will run on the judgment sum at the judgment rate until payment. I will now hear the parties on costs and consequential orders.

(A.T. Reyes)

Judge of the Court of First Instance

High Court

Mr Sam Tsui of Messrs Tsui & Co, for the Plaintiff

Mr Jonathan Wong, instructed by Messrs Richards Butler, for the Defendant